Accounting I Final Exam Questions
Course Introduction
Accounting I introduces the fundamental principles and practices of financial accounting. This course covers the accounting cycle, including the identification, recording, and reporting of business transactions, preparation of financial statements, and the use of accounting information in decision-making. Students will learn about concepts such as assets, liabilities, equity, revenue, and expenses, as well as essential accounting systems and controls. Emphasis is placed on accuracy, ethical standards, and the interpretation of financial data to provide a solid foundation for further study in accounting and related fields.
Recommended Textbook
Financial and Managerial Accounting 9th Edition by Belverd E. Needles
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Page 2
Chapter 1: Uses of Accounting Information and the Financial Statements
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Q1) Which of the following is an example of a financing activity?
A) Employing workers
B) Selling equipment
C) Paying off a loan
D) Purchasing land
Answer: C
Q2) The International Accounting Standards Board is the primary and most important determinant of generally accepted accounting principles.
A)True
B)False Answer: False
Q3) Due care means carrying out one's professional responsibilities honestly and impartially.
A)True
B)False Answer: False
Q4) Obtaining funds from a bank is an example of an investing activity.
A)True
B)False Answer: False
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Chapter 2: Analyzing Business Transactions
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Q1) The Unearned Fees account is classified as a(n)
A) liability.
B) revenue.
C) asset.
D) expense.
Answer: A
Q2) The account Dividends has a normal credit balance.
A)True
B)False
Answer: False
Q3) Dividends are classified as an expense.
A)True
B)False Answer: False
Q4) Unearned revenues are recorded by companies that
A) receive money in advance of the performance of a service.
B) pay money at the time the performance of a service is complete.
C) receive money at the time the performance of a service is complete.
D) pay money in advance of the performance of a service.
Answer: A
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Chapter 3: Measuring Business Income
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Sample Questions
Q1) Which of the following transactions is most likely not to result in an adjusting entry at the end of the period?
A) Performance of a service for which payment was received in advance
B) Payment of this month's rent
C) Purchase of office equipment
D) Purchase of a two-year insurance policy
Answer: B
Q2) Closing entries deal primarily with the balances of real accounts.
A)True
B)False
Answer: False
Q3) Revenue for which the service has been performed but no entry has been made in the accounting records is accrued revenue.
A)True
B)False
Answer: True
Q4) One of the applications of accrual accounting is adjusting the accounts.
A)True
B)False Answer: True
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Chapter 3: Supplement - Closing Entries and the Work Sheet
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Q1) In a manual system which uses a work sheet,the preparation of adjusting entries
A) typically precedes the preparation of the financial statements.
B) typically precedes preparation of the work sheet.
C) is easy because they are simply copied from the work sheet.
D) is difficult, and therefore they must first be entered into the general journal in pencil.
Q2) Which account that does not appear on the balance sheet has an amount in the Balance Sheet columns of a work sheet?
A) Dividends
B) Depreciation Expense
C) Retained Earnings
D) Accumulated Depreciation-Equipment
Q3) The work sheet is prepared after the formal adjusting and closing entries.
A)True
B)False
Q4) A work sheet is useful for all except which of the following?
A) Recording transactions from source documents
B) Recording closing entries
C) Recording adjusting entries
D) Preparing financial statements
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Chapter 4: Financial Reporting and Analysis
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Q1) Why is it important for a company to maintain the same accounting methods and practices from period to period?
Q2) A corporation's stockholders' equity section of the balance sheet may contain all except
A) T. McDonald, capital
B) Retained earnings
C) Additional paid-in capital
D) Common stock
Q3) All the following are standards of accounting information except A) flexibility.
B) reliability.
C) understandability.
D) relevance.
Q4) Which of the following items is not shown on a single-step income statement?
A) Cost of goods sold
B) Interest expense
C) Selling expenses
D) Gross margin
Q5) State the definition of a current asset.
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Chapter 5: The Operating Cycle and Merchandising Operations
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Q1) The periodic inventory system is used most commonly by companies that sell
A) low-priced, high-volume merchandise.
B) low-priced, low-volume merchandise.
C) high-priced, low-volume merchandise.
D) high-priced, high-volume merchandise.
Q2) The separation-of-duties feature of internal control can be negated when several employees are involved in a scheme.
A)True
B)False
Q3) The entry to record a sales return from a customer would require a(n)
A) decrease to Sales.
B) increase to Sales.
C) decrease to Sales Returns and Allowances.
D) increase to Sales Returns and Allowances.
Q4) Which of the following documents remains within the originating company in a purchase transaction?
A) Purchase order
B) Purchase requisition
C) Check
D) Invoice
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Chapter 6: Inventories
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Q1) Use this information to answer the following question. \(\begin{array}{llll}
\text { Jan. } & 1 & \text { Inventory } &15 \text { units @ } \$4.00 \\ & 8 & \text { Purchase } & 60 \text { units } @ \$ 4.40\\ &17 & \text { Purchase } & 30 \text { units } @ \$ 4.20 \\ &25 & \text { Purchase } & 45 \text { units @ } \$ 8.40 \\
&&\text { Total sales }& 100 \text { units } \end{array}\)
Assuming that the specific identification method is used and that ending inventory consists of 15 units from each of the three purchases and five units from the January 1 inventory,cost of goods sold is
A) $221.
B) $418.
C) $338.
D) $445.
Q2) In verifying a claim for a loss of inventory,an insurance company might use the gross profit method.
A)True
B)False
Q3) How is the matching rule applied when accounting for merchandise inventory?
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Chapter 7: Cash and Receivables
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Sample Questions
Q1) Cash consists of all of the following except A) deposits in savings accounts.
B) money orders from customers.
C) compensating balances.
D) IOUs from customers.
Q2) A company that uses the allowance method writes off a specific account as uncollectible,but then the customer pays.The entries made upon receiving payment will A) decrease Cash.
B) decrease Accounts Receivable.
C) increase Allowance for Uncollectible Accounts.
D) decrease Uncollectible Accounts Expense.
Q3) Compensating balances are kept separate from the Cash account balance on the balance sheet.
A)True
B)False
Q4) The holder of a note adjusts for accrued interest by debiting Interest Receivable and crediting Interest Income.
A)True B)False
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Chapter 8: Current Liabilities and Fair Value Accounting
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Q1) All of the following can be employee payroll withholdings except A) state income taxes.
B) medical insurance premium payments.
C) charitable contributions.
D) federal unemployment tax.
Q2) To determine the payables turnover,one first calculates the days' payable.
A)True
B)False
Q3) Liabilities that might arise from which of the following probably would be disclosed only in the notes to the financial statements?
A) Possible warranty claims
B) Guarantees of the debt of other companies
C) Possible bankruptcy of an important customer
D) Estimated income taxes for the current year
Q4) Failure to record a liability probably will
A) result in an overstated net income.
B) result in overstated total liabilities and stockholders' equity.
C) have no effect on net income.
D) result in overstated total assets.
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Chapter 9: Long Term Assets
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Q1) On January 1,2008,North Side Manufacturing Company purchased for $40,000 a machine that will produce an estimated 75,000 units of Product X.The machine has an estimated useful life of four years and an estimated residual value of $8,000.Calculate the following amounts,rounding answers to the nearest dollar: (a)the carrying value of the machine after it has been used for three and one-half years,under the straight-line method; (b)depreciation expense for 2010,under the production method (assume that 13,000 units were produced that year); and (c)accumulated depreciation at the end of 2009,under the double-declining-balance method.(Show your work.)
Q2) The entire cost of developing computer software should be capitalized and amortized over the software's useful life.
A)True
B)False
Q3) Which of the following is not a component of free cash flow?
A) Purchases of plant assets
B) Net income
C) Dividends
D) Net cash flows from operating activities
Q4) What is goodwill and when may it be recorded?
Q5) Present two arguments in favor of the use of accelerated depreciation.
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Chapter 10: Long-Term Liabilities
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Q1) The calculation of cash for interest to be paid each interest period in connection with a bond payable is not influenced by any premium or discount upon issuance.
A)True
B)False
Q2) Failure to make interest payments on debt can force a company into bankruptcy.
A)True
B)False
Q3) The responsibility for receiving the proper amount of interest falls on the bondholder most heavily in the case of
A) term bonds.
B) serial bonds.
C) coupon bonds.
D) registered bonds.
Q4) If the market interest rate is higher than the face interest rate at the date of issuance,bonds will
A) not sell until the face interest rate is adjusted.
B) sell at face value.
C) sell at a discount.
D) sell at a premium.
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Chapter 11: Contributed Capital
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Q1) A disadvantage of the corporate form of business is
A) lack of mutual agency.
B) professional management.
C) ease of transfer of ownership.
D) tax treatment.
Q2) Dividends yield equals
A) market price per share divided by dividends per share.
B) net income divided by dividends per share.
C) dividends per share divided by net income.
D) dividends per share divided by market price per share.
Q3) If Willis Corporation has 80,000 shares of common stock authorized,50,000 shares of common stock issued,and holds 12,000 shares of common stock as treasury stock,the total number of outstanding shares of Willis Corporation amounts to
A) 22,000.
B) 68,000.
C) 38,000.
D) 26,000.
Q4) The par value of stock constitutes the legal capital of a corporation.
A)True
B)False
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Chapter 12: Investments
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Q1) James Company buys 100 percent of the outstanding stock of Maier Company for $650,000.Maier Company has contributed capital of $420,000 and retained earnings of $180,000.The fair market value of Maier's identifiable net assets was equal to their book value on the date of acquisition.The consolidated financial statements would contain A) neither minority interest nor goodwill.
B) goodwill but not minority interest.
C) minority interest but not goodwill.
D) minority interest and goodwill.
Q2) Trading securities are valued on the balance sheet at A) lower of cost or market.
B) cost.
C) market value.
D) cost, adjusted for the effects of interest.
Q3) Under the equity method of accounting for a stock investment,a proportionate share of the investee's income is recorded on the investor's records.
A)True
B)False
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Chapter 13: The Corporate Income Statement and the Statement of Stockholders Equity
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Q1) A statement of retained earnings is not as informative as a statement of stockholders' equity.
A)True
B)False
Q2) When alternative acceptable accounting methods exist,a better quality of earnings generally is produced from selecting an accounting method that has the effect of reporting the
A) lowest amount of future earnings.
B) greatest amount of retained earnings currently.
C) lowest amount of current earnings.
D) greatest amount of assets currently.
Q3) Gains and losses from the takeover of property by a foreign government are treated as discontinued operations.
A)True
B)False
Q4) "Big baths" commonly occur when a company is having a good year.
A)True
B)False
Page 16
Q5) Distinguish between cash and retained earnings.
Q6) Specifically,what gives rise to the Deferred Income Taxes account?
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Chapter 14: The Statement of Cash Flows
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Q1) A schedule of noncash investing and financing activities is not required when a statement of cash flows is prepared using the indirect method.
A)True
B)False
Q2) Investors and creditors would find the statement of cash flows least useful in assessing
A) financial position at a point in time.
B) need for additional financing.
C) ability to pay dividends and liabilities.
D) ability to generate positive future cash flows.
Q3) Royer Corporation engaged in this transaction: Paid employee wages.
Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.
A) Financing activities section
B) Investing activities section
C) Does not represent a cash flow
D) Operating activities section
Q4) How is it possible for a company to show a net loss for a given year,yet produce positive net cash flows from operating activities?
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Chapter 15: The Changing Business Environment - a Managers Perspective
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Q1) The fathers of the balanced scorecard,Drs.Kaplan & Norton,introduced four generic perspectives from which to view a business.Consider the following four questions and briefly describe the generic perspective that relates to the question and why.
1.How should we present ourselves to our investors and owners to be considered by them as a financial success and an attractive investment?
2.What do we have to offer our customers related to our product,customer intimacy,and operational excellence?
3.In what activities must we excel to be able to accomplish our financial and customer-oriented objectives?
4.What do we need to change in our infrastructure to achieve number 3?
Q2) A business plan is a comprehensive statement of how a company will achieve its objectives,but does not include budgets or performance goals.
A)True
B)False
Q3) Activity-based management is an extension of activity-based costing. A)True B)False
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Chapter 16: Cost Concepts and Cost Allocation
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Q1) Overhead costs are not
A) allocated to the Work in Process Inventory account.
B) charged directly to the Finished Goods Inventory account.
C) assigned to specific products.
D) considered product costs.
Q2) All manufacturing costs that are assigned to completed (but unsold)products should be classified as
A) materials inventory costs.
B) overhead costs.
C) work in process inventory costs.
D) finished goods inventory costs.
Q3) A manufacturing company applies overhead based on direct labor hours.At the beginning of the year,it estimated that overhead costs would be $720,000 and direct labor hours would be 90,000.Actual overhead costs incurred were $754,400,and actual direct labor hours were 92,000.What is the amount of overapplied or underapplied overhead at the end of the year?
A) $34,400 overapplied
B) $18,400 overapplied
C) $34,400 underapplied
D) $18,400 underapplied
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Chapter 17: Costing Systems- Job Order Costing
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Q1) The types of computations for costs to be transferred out of Work in Process Inventory differ if the production process involves multiple departments rather than a single department.
A)True
B)False
Q2) The balance in the Work in Process account equals the A) balance in the Finished Goods Inventory account.
B) balance in the Cost of Goods Sold account.
C) balances on the job cost sheets of uncompleted jobs.
D) balance in the Overhead account.
Q3) The ending balance in the Work in Process Inventory account is supported by individual Overhead account balances.
A)True
B)False
Q4) Costs for individual jobs are maintained on job order cost cards when job order costing is in use.
A)True
B)False
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Chapter 18: Costing Systems- Process Costing
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Q1) In a process costing system,products flow in a LIFO manner,from department to department.
A)True
B)False
Q2) Which of the following is not included in conversion costs?
A) Indirect labor
B) Direct labor
C) Direct materials
D) Overhead
Q3) When the FIFO costing method is used in process costing,the number of units in beginning inventory is multiplied by 100 percent to determine the equivalent units.
A)True
B)False
Q4) In process costing,all costs incurred by a department or production process are divided by the equivalent units produced during the period to determine the average cost per unit produced.
A)True
B)False
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Chapter 19: Value-Based Systems- Abm and Lean
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Q1) A goal of process value analysis (PVA)is to reduce nonvalue-adding activities.Outline a procedure a company could use to accomplish this goal.
Q2) Value-based systems are information systems that provide only customer-related information but not activity-based information.
A)True
B)False
Q3) Which of the following activities would be part of the value chain of a manufacturer?
A) Inventory control
B) Product engineering
C) Cost accounting
D) Materials storage
Q4) Backflush costing eliminates the need to make journal entries during the period to track cost flows through the production process as the product is made.
A)True
B)False
Q5) How do managers measure an activity's performance?
Q6) Why is process value analysis not part of the general ledger accounting system?
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Chapter 20: Cost Behavior Analysis
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Q1) Which of the following statements is true regarding fixed and variable costs?
A) Both costs are constant when considered on a total basis.
B) Variable costs are constant in total, and fixed costs are constant per unit.
C) Both costs are constant when considered on a per unit basis.
D) Fixed costs are constant in total, and variable costs are constant per unit.
Q2) a.What is the formula for breakeven units?
b.How is knowledge of the contribution margin of a product helpful? In your answer,explain two possible benefits of computing the contribution margin of a product.
Q3) When using the high-low method,the accountant assumes the fixed portion of mixed costs to be the lowest fixed amount incurred during the period under review.
A)True
B)False
Q4) The level of operating capacity that is needed to meet expected sales demand is called
A) practical capacity.
B) normal capacity.
C) ideal capacity.
D) excess capacity.
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Chapter 21: The Budgeting Process
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Q1) Responsibility accounting authorizes managers to take control of and be held accountable for the revenues and expenses in their budgets.
A)True
B)False
Q2) XYZ Company expects to sell 37,000 units of its product in the coming year.Each unit sells for $45.Sales brochures and supplies for the year are expected to cost $7,000.Three sales representatives cover the Southeast region.Each one's base salary is $25,000,and each earns a sales commission of 5 percent of the selling price of the units he or she sells.The sales representatives supply their own transportation; they are reimbursed for travel at a rate of $0.40 per mile.The company estimates that the sales representatives will drive a total of 75,000 miles next year.From the information provided,calculate XYZ Company's budgeted selling expenses for the coming year.
A) $195,250
B) $145,250
C) $120,250
D) $83,250
Q3) Describe three benefits budgeting provides to an organization's success.
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Chapter 22: Performance Management and Evaluation
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Q1) The logical linking of goals to measurable objectives and targets and the tying of appropriate compensation incentives to the achievement of such objectives and targets are critical to the successful coordination of goals.
A)True
B)False
Q2) As the staff accountant for Investment Center 713,calculate the October 20xx ROI,using the following information: \(\begin{array}{lr}
\text { October 20xx profit margin } & 38 \% \\
\text { October 20xx sales } & \$ 2,000,000 \\
\text { Assets at September 30, 20xx } & 1,850,000 \\
\text { Assets at October 31, 20xx } & 1,855,000 \end{array}\)
Q3) What type of incentive compensation is utilized to motivate employees to achieve financial targets that increase the company's stock price?
A) Profit-sharing plans
B) Awards
C) Cash bonuses
D) Stock option programs
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Chapter 23: Standard Costing and Variance Analysis
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Q1) Which of the following statements is not true?
A) Performance reports should be tailored to the responsibilities of the manager or department for which they are prepared.
B) Performance reports normally report standard costs and variances.
C) Performance reports should contain space for explanation of variances.
D) Performance reports do not present the causes of variances.
Q2) Prepare a flexible budget for 8,000,9,000,and 10,000 units of output,given the following data: \(\begin{array}{llr}
\text { Variable costs: } &\text { Budgeted fixed overhead } \$ 90,000\\
\text { Direct materials } &\$5\\
\text { Direct labor} &4\\
\text {Overhend } &8 \end{array}\)
Q3) The total fixed overhead variance is comprised of the
A) variable overhead efficiency and fixed variances.
B) fixed overhead budget and volume variances.
C) labor efficiency and rate variances.
D) variable overhead spending and efficiency variances.
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Chapter 24: Short Run Decision Analysis
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Q1) Courtney Sinclaire is trying to rent a new bicycle.She has narrowed her choices to two lease arrangements,each with unique characteristics.Bike Superior would rent for $220 per year,and Bike Deluxe's annual rent would be $250.Bike Superior would need a new seat costing $35 and new racing tires costing $95.The old seat and tires could be sold for $30.Bike Deluxe is fully equipped but would need to be painted at a cost of $110.Maintenance and upkeep on both bikes would average $60 per year.
a. Identify the relevant data in this problem.
b. Prepare an incremental analysis for Courtney to aid her in this decision.
c. What decision should Courtney make?
Q2) Outsourcing production or operating activities does not help in reducing a company's investment in physical assets and human resources.
A)True
B)False
Q3) Sunk costs can be recovered and are relevant in short-run decision making. A)True B)False
Q4) Only large corporations benefit from capital investment analysis.
A)True B)False
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Chapter 25: Capital Investment Analysis
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Q1) The acceptable proposals are ranked in order of net present value,payback period or rate of return in capital investment decisions.
A)True
B)False
Q2) To use an annuity table,the cash flows for each interest period must be equal.
A)True
B)False
Q3) Capital investment analysis can be applied in case of expensive and long-term projects.
A)True
B)False
Q4) When deciding whether to keep or replace a fixed asset,the asset's carrying value could be relevant to the decision.
A)True
B)False
Q5) Cost of capital of a company will be determined in four steps.
A)True
B)False
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Chapter 26: Pricing Decisions,incltarget Costing and Transfer Pricing
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Q1) Overall company profits will not be enhanced if a buying division acquires products from outside suppliers at an annual cost that is less than the incremental cost to the supplying division within the company.
A)True
B)False
Q2) Transfer pricing
A) is a concept readily accepted by managers of divisions, because it relies on concepts used in cost-based pricing methods.
B) incorporates procedures that allow for ease in determining the amount of profit associated with each division of a decentralized company.
C) involves determining the cost and profit if the output of one division is transferred to another division of the same company.
D) is not used by many companies because it is difficult to eliminate intercompany profits.
Q3) Transfer pricing can influence operating efficiency and profitability.
A)True
B)False
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Chapter 27: Quality Management and Measurement
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Q1) The first step in ensuring the production of high-quality products is to have a sound product design.
A)True
B)False
Q2) Which of the following is not an example of a conformance cost?
A) Prevention cost
B) Appraisal cost
C) Quality engineering cost
D) External failure cost
Q3) How does an ERP system differ from an MIS?
A) The ERP system informally links the different areas of management for specific purposes.
B) There is no difference.
C) The ERP system combines all areas of management into one centralized data warehouse.
D) The ERP system can be used only in a service business.
Q4) Identify and describe three traits that differentiate management information systems (MIS)from traditional management accounting techniques.
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Chapter 28: Financial Analysis of Performance
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Sample Questions
Q1) The index number used in trend analysis is computed by dividing the base year amount by the index year amount,and multiplying that result by 100.
A)True
B)False
Q2) Companies file their quarterly reports with the SEC on Form 8K.
A)True
B)False
Q3) In general,the greater the investment risk taken,the lower the return required as compensation.
A)True
B)False
Q4) Liquidity ratios are an indication of a company's
A) ability to effectively employ its resources.
B) overall debt to equity position.
C) overall debt position.
D) ability to pay bills when they are due and to meet unexpected needs for cash.
Q5) Form 10-Q refers to the annual report filed with the SEC. A)True B)False
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